JULY 2020

OVERVIEW OF US PROPERTY MARKETSADJUSTING TO A NEW FUTURE

REVATHI GREENWOODGlobal Head of Data and Insights

AGENDA

01 02 03 04Recovery? CRE ElectionsTrends

80

85

90

95

100

105

110

115

120

2019

Q4

2020

Q1

2020

Q2

2020

Q3

2020

Q4

2021

Q1

2021

Q2

2021

Q3

2021

Q4

2022

Q1

2022

Q2

2022

Q3

2022

Q4

2023

Q1

2023

Q2

2023

Q3

2023

Q4

2024

Q1

2024

Q2

2024

Q3

2024

Q4

19Q4 Index S1 (U-shape) S3 Swoosh

U-shape: return to 2019 GDP by 2021Q3

Swoosh: return to 2019 GDP by 2023Q1

Source: Moody’s scenarios

The Road Back to 2019U.S. Real GDP, 19Q4 = 100

20

40

60

80

100

120

140

0

20

40

60

80

100

120

140

160

180

2004

Q1

2005

Q1

2006

Q1

2007

Q1

2008

Q1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

2016

Q1

2017

Q1

2018

Q1

2019

Q1

2020

Q1

Investment Sales, $mil. (3Qtr Moving Average, Left scale) CCI (right scale)

Source: RCA, The Conference Board

What to Watch: Consumer Confidence

Source: Morning Consult

Consumer Confidence Falling EverywhereSharp change in Southern & Western States late to suffer…

Consumer ConfidenceJuly 1

Consumer ConfidenceApril 1

-350,100

-1,886,000

-924,000

-585,500

-365,400-465,695

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-2,000,000

-1,800,000

-1,600,000

-1,400,000

-1,200,000

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

DC Metro NY Metro LA Metro Chicago SF Metro Boston

Job Losses % of Total Employment Lost

Source: Moody’s

May Jobs reportIn Major Markets, 2020 Net Jobs

-35,124

-3,768 -33,640-46,632

-164,381

876

-13%

-2% -4%

-10%

-48%

0%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

-180,000

-160,000

-140,000

-120,000

-100,000

-80,000

-60,000

-40,000

-20,000

0

20,000

DC Metro Sector Data

Net Jobs % of Total Sector Employment

-163,440

-633,310

-407,850

-253,000

-174,050 -157,030

4.8% 5.3%6.3%

5.3%

7.0%5.6%

9.2%

17.5% 17.0% 17.2%

14.9%

11.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-700,000

-600,000

-500,000

-400,000

-300,000

-200,000

-100,000

0

DC Metro NY Metro LA Metro Chicago SF Metro Boston

Job Losses % of 2020 Employment Peak Unemployment Rate

Source: Moody’s

Jobs Forecast 2020In Major Markets, Jobs, Unemployment

4,610

90

-2,960

-15,220

-22,020

-32,030

-62,660

1.26%

0.06%

7.23%

5.59%

4.91%

4.06%

18.36%

-80,000-60,000-40,000-20,000 0 20,000

Federal Government

FIRE

Legal

Retail

Education/Healthcare

PBS

Leisure and Hospitality

DC Metro Job Sectors – 2020 Forecast

% of 2020 Sector Employment

Session Title 9

Source: Cushman & Wakefield Research (Office, Industrial), Moody’s Analytics, Reis (Retail, Multifamily)

U.S Vacancy Forecasts

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Baseline

Office

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Baseline

Industrial

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Baseline

Retail

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Baseline

Multifamily

0

100

200

300

400

500

600

700

800

900

1000

Dot Com GFC Covid-19

Increase in Vacancy (bps)

Source: Cushman & Wakefield Research (Office, Industrial), Moody’s Analytics, Reis (Retail, Multifamily)

U.S Vacancy in Context

0

100

200

300

400

500

600

700

800

900

1000

Dot Com GFC Covid-19

Increase in Vacancy (bps)

0

100

200

300

400

500

600

700

800

900

1000

Dot Com GFC Covid-19

Increase in Vacancy (bps)

0

100

200

300

400

500

600

700

800

900

1000

Dot Com GFC Covid-19

Increase in Vacancy (bps)

Office Industrial Retail Multifamily

Source: RCA, Cushman & Wakefield Research

All Product Types Impacted

Americas Investment SalesDollars in billions

-42%

-44%-25%

-43%0

1

2

3

4

5

6

7

0

10

20

30

40

50

60

70

80

90

100

4 8 12 16 20 24 4 8 12 16 20 24 4 8 12 16 20 24 4 8 12 16 20 24

Apartment Office Industrial Retail

2020 Weekly (rhs) 2017 2018 2019 2020

Week 1: First Week in JanuaryWeek 27: Last Week in June

Source: Real Capital Analytics, Cushman & Wakefield Research

Spreads at 20 Year High

0

2

4

6

8

10

2002

Q1

2004

Q1

2006

Q1

2008

Q1

2010

Q1

2012

Q1

2014

Q1

2016

Q1

2018

Q1

2020

Q1

10-Yr Treasury Yield U.S. Office Cap Rate

Current: 519 bps

Historical Average: 396 bps

Historical Avg. *Current

Office 396 519

Industrial 412 489

Multifamily 305 421

Retail 386 712

OFFICE CAP RATES VS. 10-YR TREASURY YIELD

CAP RATE SPREADS OVER 10-YR (BPS)

*As of 7/10/2020

22.8

3.8

-4.8

-8.1

-22.9

-26.5

-39.4

-51.6

-60 -40 -20 0 20 40

S&P

500

(-9.6

)

Source: NAREIT, Cushman & Wakefield ResearchUpdated 7/8/20

REITS Indicate a Price Correction is ComingYear-to-Date Total Return Performance: U.S. REITs (%)

Hotel Sector: Occupancy has fallen by 70% globally, Revpar down ~60%.

Har

dest

Hit

Leas

t im

pact

ed

Retail: Social distancing – massive disruption. Strength in spots (e.g. grocery & pharma).

Office: Any sector that supports human interaction is exposed.

Housing: Uncertainty putting big pause on home sales.

Multifamily: More resilient, not immune. Enters crisis overbuilt if demand falls off.

Industrial: More resilient. Supply chain disruptions but even stronger shift to eCommerce.

Storage: More resilient, but not immune.

Data Centers: Stay at home economy, more data. Somewhat GDP agnostic.

CITY RANKING

AustinBostonDallasDC Metro DenverLos AngelesMinneapolisNew YorkPortlandRaleigh/DurhamSacramentoSan DiegoSan FranciscoSan JoseSeattle

Number of

Variables

Variable Examples

Demographic 8 Population density, Growth in 24-44 age cohort, Med HH Income

Economic 10 RGDP Growth 2019-2024, Industrial Diversity, Life Science and TAMI employment

Market Quality 9 Quality of Life, Global Talent Competiveness, Cost of Living

Real Estate 6 Prime office metrics

Capital Markets 1 Investment Sales

COVID-19 Impact 8 High CRE leasing in Low Risk industries, Exposure to Virus

TOP 15MARKETS

Source: Cushman & Wakefield Research

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

-3

-2

-1

0

1

2

3

4

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Vaca

ncy

Rat

e

Squa

re F

eet (

Milli

ons)

New Deliveries Net Absorption Average Deliveries: 1.5 msfAverage Absorption 175k SF Vacancy Rate Average Vacancy: 17%

Source: Cushman & Wakefield Research

Northern Virginia – Macro MarketOffice Leasing Fundamentals

Source: Cushman & Wakefield Research

Nova Year Over Year ActivityJanuary Through June

METRIC 2018 2019 2020

Average Rent $34.96 $34.95 $37.44

Free Rent (Months/Year) 0.90 0.90 0.94

Gross Free Rent 6.2 6.3 7.0

Average TI $44.67 $61.24 $62.82

% Renewal 21% 19% 27%

Average Lease Size 12,875 12,218 12,550

Gross Lease Volume 6,87 million 7.04 million 4,40 million

(drop by 38%)

Sublet Availability 1.2 million 2.0 million 2.7 million

71%

19%

6%3%

0.3% 0.3%1%

2019

Under 10K SF 10,000 - 24,999 25,000-49,999 50,000-99,999 100,000-149,999 150,000-199,999 200,000 +

Source: Cushman & Wakefield Research

Lease Distribution By YearJanuary through June, Number of Deals

77%

13%

6%3%

0.4% 0.2%1%

2018

69%

20%

6%3%

1% 0.3% 1%

2020

0%200%400%600%800%1000%1200%1400%1600%1800%2000%

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2019 Leasing Activity 2020 Leasing Activity Vacancy

Source: Cushman & Wakefield Research

2020 NoVa NEW DEAL ACTIVITYOffice Leasing Fundamentals, January to June

Source: Cushman & Wakefield Research

Sublet by Submarket2020 Q1 and Q2

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Q1 Q2

Source: RCA, Cushman & Wakefield Research

DC Metro Investment sales

-67%

-9%

-25%0

0

0

1

1

1

1

0

1

2

3

4

5

6

4 8 12 16 20 24 4 8 12 16 20 24 4 8 12 16 20 24 4 8 12 16 20 24

Apartment Office Industrial Retail

2020 Weekly (rhs) 2017 2018 2019 2020

Week 1: First Week in JanuaryWeek 27: Last Week in June

-38%

Suburban

Source: William H Frey analysis of Census Bureau Population estimates July 2010-2019 (released May 21, 2020); Brookings Institute

Population Growth Leans Towards SuburbsAnnual growth rates stronger in the suburbs for second half of last decade

Suburban Population Growth Stronger Since ‘16

DC Metro

-75 -50 -25 0 25 50 75 100 125 150 175 200Growth: Suburbs vs. Primary City (bps)

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Primary City Growth Suburb Growth

*Includes 25 largest U.S. MSAs

Markets where 2018-2019 population growth higher in primary city

2018 to 2019 -majority of U.S.

markets had stronger population growth in

suburbs.

Difference in Population Growth, 2018-19*

Source Cushman & Wakefield Research

Vacancy Rates ConvergingThe suburban share of total occupancy has been rising steadily for the past 15 years

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

Vaca

ncy

Rat

e

CBD Suburban

Q1 ‘10 Gap: 348 bps

Q1 ‘20 Gap: 35 bps

Q4 ‘08 Gap: 406 bps

The total 10-year change in vacancy rates (Q1 2010-Q1 2020):• CBD: -254 bps• Suburbs: -568 bps

Source Cushman & Wakefield Research

Cost Differential ClosingCBD and suburban rent spreads down from late-2016 peak

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

Source: Cushman & Wakefield Research

Most Active Suburban Markets – Top 24Total net absorption of suburban office space (Q1 2018 – Q1 2020)

5.44.7 4.6

4.2 4.13.4 3.3

2.4 2.2 2.11.8 1.8 1.7 1.7 1.6

1.3 1.1 1.0 1.0 1.0 0.9 0.8 0.8 0.70%

25%

50%

75%

100%

125%

150%

0

1

2

3

4

5

6

Milli

ons

of S

q. F

eet

Suburban Absorption (Since Q1 2018) % of All Net Absorption Broad range

Working from home

Source: U.S. Census Bureau; % working main job from home on average day

Remote Working Already Growing Pre-Covid-19

United States (% working main job from home*)

20.6%

33.6%

27.4%

15.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2004 2006 2008 2010 2012 2014 2016 2018

All: Wage and salary workers Mgmt. / Financial Sales Administrative Support

Source: Gallup Panel 2020

Covid Accelerates This TrendPercent of U.S. Workers Who Have Worked Remotely At Least Some of the Time

30

35

40

45

50

55

60

65

Mar 13-15 Mar 16-19 Mar 20-22 Mar 23-26 Mar 27-29 Mar 30-April 2Source: Global Workforce Analytics

25-30%

PERCENT EXPECTED TO WORK FROM HOME ON MULTIPLE DAYS BY THE

END OF 2021

Source: CoreNet

Businesses Still Need Office Space, Just Less

94%

OF BUSINESSES SAY THEY PLAN TO BRING EMPLOYEES BACK TO

THE OFFICE

10%

SAY WILL ULTIMATELY REQUIRE LESS SPACE

PER EMPLOYEE

Data centers

Data Centers Rise to the Forefront

Revenue of major cloud services providers were up in Q1: Microsoft 16% YoY (with Azure up 59%), • Amazon 26% YoY (with AWS up 33%), • Google 13% YoY (with Google Cloud up 52%). • The five main data center REITs are planning to spend over $5.6 billion on current development over the next two years.

The largest markets nationally remain very tight in available capacity. • Northern Virginia stands at 5% vacancy, with another 330 MW (or 25% of current market size) currently under

construction.• Silicon Valley at 5.5%, • Los Angeles at 6%, • Atlanta at 9%,• Phoenix and Chicago at 10%.

• The largest internet exchanges across the world saw new record in Q1 . • DE-CIX hit a world-record 9.1 terabits per second noting 50% increases in teleconferencing and 25% increases in online gaming

and social media usage.

Source: Cushman & Wakefield Research

Northern Virginia Absorption

120 123

293

125

71

0

50

100

150

200

250

300

350

2016 2017 2018 2019 2020

Multifamily

Source: NMHC, Pinnacle Property Management, CoStar, Axiometrics / RealPage, NIC, WinnCompanies, market participant client interviews

Multifamily Universe & PerformanceScope of each sub asset type & real-time performance

Subasset Type Current Delinquency (May 2020) Current Vacancy (1Q20)

National 9.2% 7%

Class A 6.7% 11%

Class B 7.1% 6%

Class C 9.7% 5%

Source: JCHS

Renter At-Risk Geographies45%+ of renters across major markets are moderately burdened

Source: CoStar Group, Cushman & Wakefield Research; Forecasts have been updated as of the first week in May

Rent Growth to Bounce Back in 2021?Annual average rent growth historical trends and forecasts (%)

-4.3%

3.2%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

REIS (B) CoStar Base Axiometrics

Source: Bureau of Labor Statistics

The Brightside for DC metro

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Net Migration Surges After Recession in DC

Recession Net Migration

Ecommerce

Source: U.S. Department of Commerce, ShawSpring Partners, Bank of America

Covid-19 Accelerates This TrendUnited States: eCommerce as a % of Total Retail Sales

eCommerce Penetration Before After (F)

Apparel & Accessories 29% 40%

Auto & Parts 5% 10%

Books, Music & Video 55% 68%

Consumer Electronics 43% 55%

Food & Beverage 3% 15%

Furniture & Furnishings 24% 42%

Health & Beauty 11% 25%

Office Supplies 27% 60%

Other 24% 40%

Toys & Hobby 37% 50%0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(F)

2021(F)

2022(F)

2023(F)

Reve

nue

in m

illio

n U.

S. d

olla

rs

eCommerce Sales Physical Retail Sales eCommerce % of Total Sales

April 2020

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(F) Best

Case

2020(F)

LikelyCase

2020(F)

WorstCase

# of

Sto

re U

nits

Major Chain Closures Temporary Closures as of 3/19/20 eCommerce % of Total Retail Sales

Source: Company filings, U.S. Department of Commerce, CoreSight Research, Cushman & Wakefield ResearchNote: Does not include independent retail closures

Accelerates the Retail DeclineMajor Chain Closures

Source: Cushman & Wakefield Research

DC Metro Retail Supply and Demand

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-200

-100

0

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q2

Vaca

ncy

Rat

e

Squa

re F

eet i

n th

ousa

nds

Net Absorption Deliveries Vacancy Rate

Source: Trepp

Retail Defaults Have Quadrupled…Delinquencies—precursor of defaults—have increased 9X Since March…

DOES THE PRESIDENT MATTER?

NATIONAL REPORT CARD

3.0% 2.6%GDP 1969 to 2018

220.4 msf 265.1 msfLeasing Activity: Average Annual 1996 to 2019

Tax CutsClimate Change

ImmigrationTRADE WARS

HEALTH CARE

INFRASTRUCTURE

Health Care

STIMULUSClimate Change

FINANCIAL REGULATION

SPENDING2 YEAR LAG

NATIONAL DEFENSE SPENDING

100

200

300

400

500

600

700

80020

01

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Est

imat

ed

2020

Est

imat

ed

In B

illion

s

Obama: $618.3B Trump: $631.5B

+105%

-11%

+24%

DC Metro Takeaways

Key Themes Considerations

Suburban Revival/ Migration out of Highly Dense Big Cities

Nova well placed to benefit from migration not only from DC core but also larger cities with high cost of living Working from home means working from home anywhere in the country.

High Real estate exposure to Low Risk Sectors

City and population fundamentals

Automation

High millennial population: 30.0% vs. 22.0% nationalHighly educated: Bachelor degree attainment is 61% higher than the nationAffluent: Median HH income 63% higher than the national average

Growth areas include: industrial logistics, multifamily, R&D, life sciences, necessity retail and manufacturing.DC metro: Government, defense spending, technology (Amazon HQ2), healthcare.tightest data center market.

Elections Overall DC metro CRE trajectory will not change. Trade issues with China continue. Life sciences growth. Watch immigration, tax, death sciences

Businesses were already looking for ways to automate certain job functions. COVID-19 creates extra incentive to replace labor with technology.

Suburban Revival/ Migration out of Highly Dense Big Cities

High Real estate exposure to Low Risk Sectors

City and population fundamentals

©2020 Cushman & Wakefield. The material in this presentation has been prepared solely for information purposes, and is strictly confidential. Any disclosure, use, copying or circulation of this presentation (or the information contained within it) is strictly prohibited, unless you have obtained Cushman & Wakefield’s prior written consent. The views expressed in this presentation are the views of the author and do not necessarily reflect the views of Cushman & Wakefield. Neither this presentation nor any part of it shall form the basis of, or be relied upon in connection with any offer, or act as an inducement to enter into any contract or commitment whatsoever. NO REPRESENTATION OR WARRANTY IS GIVEN, EXPRESS OR IMPLIED, AS TO THE ACCURACY OF THE INFORMATION CONTAINED WITHIN THIS PRESENTATION, AND CUSHMAN & WAKEFIELD IS UNDER NO OBLIGATION TO SUBSEQUENTLY CORRECT IT IN THE EVENT OF ERRORS.

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Slide Number 1AGENDASlide Number 3The Road Back to 2019What to Watch: Consumer ConfidenceConsumer Confidence Falling EverywhereMay Jobs reportJobs Forecast 2020Slide Number 9U.S Vacancy  ForecastsU.S Vacancy in ContextAll Product Types ImpactedSpreads at 20 Year HighREITS Indicate a Price Correction is ComingCITY RANKING Northern Virginia – Macro MarketNova Year Over Year ActivityLease Distribution By Year�2020 NoVa NEW DEAL ACTIVITYSublet by SubmarketDC Metro Investment sales Slide Number 22Slide Number 23Population Growth Leans Towards SuburbsVacancy Rates ConvergingCost Differential ClosingMost Active Suburban Markets – Top 24Slide Number 28Remote Working Already Growing Pre-Covid-19Covid Accelerates This TrendBusinesses Still Need Office Space, Just LessSlide Number 32Data Centers Rise to the ForefrontNorthern Virginia Absorption Slide Number 35Multifamily Universe & PerformanceRenter At-Risk GeographiesRent Growth to Bounce Back in 2021?The Brightside for DC metroSlide Number 40Covid-19 Accelerates This TrendAccelerates the Retail DeclineDC Metro Retail Supply and DemandRetail Defaults Have Quadrupled…Slide Number 45 Slide Number 47Slide Number 48Slide Number 49Slide Number 50Slide Number 51DC Metro Takeaways Slide Number 53